Mukesh Ambani ushers in telecom revolution with Reliance Jio

NEW DELHI: Mukesh Ambani announced the long-awaited official launch of Reliance Jio Infocomm's services next week, outlining a strategy that promises to transform India's telecom business by offering free voice calls and mobile internet at a fifth of current rates along with a wide range of entertainment options underscoring the theme of convergence.

“The era of paying for voice calls is ending,“ Ambani said. “No Jio customer will ever have to pay for voice calls again.“ The unveiling sent the stocks of phone companies tumbling, wiping out investor wealth of ` . 13,000 crore as Ambani spoke at the Reliance Industries Ltd annual general meeting in Mumbai.No. 1 Bharti Airtel, third-ranked Idea Cellular and Reliance Communications fell by 6.4%, 10.5% and 8.8%, respectively, on the Bombay Stock Exchange on fears that they would have to either match Jio or risk losing users. Shares of Reliance Industries fell 2.7% to . 1,029.15 on a day the benchmark in` dex ended flat.

The official launch will take place on September 5 with free voice and data services till the end of the year for all users. The company is hoping that free calls, free national roaming and cheaper Internet access will help it rapidly ramp up to 100 million users.That compares with nearly 256 million users for market leader Bharti Airtel. Users of other networks can switch to Jio from September 5 using mobile number portability (MNP).

GSM industry body Cellular Operators Association of India (COAI) said it doesn't see too many users switching and that maintaining service quality will be a challenge.

COAI Director General Rajan Mathews said the claim of free calls is not entirely correct as the tariffs bundle data and voice. Jio denied this, saying calling will be totally free and no data will be deducted on account of calls.

Ambani took direct aim at the incumbents, saying their legacy networks were not built for data and had been upgraded as an afterthought, rendering them inefficient.Jio's has been built for data and hence offers better quality of service, he said. This carries forward the conflict that has flared between the two sides with the incumbents even accusing the regulator of bias, which has been denied.

But Ambani also urged Jio's rivals to provide enough points of interconnection (PoI) so that calls could go through smoothly, adding that they should not obstruct users who want to switch to Jio via MNP.

FREE OFFER MAY BE EXTENDED

Jio said it may extend the introductory offer of free services beyond December 31 if calls still don't go through due to PoI issues or users face challenges in switching to its network via MNP.

“Jio will give the `power of data' to each Indian to fulfil every dream and to collectively take India to global digital leadership,“ Ambani said. “The world's demand for digital oxygen, that is data, is growing explosively. Jio's mission is to meet this exploding need for India, and to take our nation from data shortage to data abundance.“

Ambani said subscribers should pay for only one service, either voice or data, enunciating a principle that threatens one of the main revenue streams for incumbents -they charge for both. Jio will charge for data effectively at five paisa per MB or Rs 50 per GB.

“Data packs available in the market have an effective rate of about Rs 250 per GB. With Jio, you pay five to 10 times lower -Rs 25-50 per GB depending on your data usage,“ with unlimited data at night, Ambani said.

Later in the day, Jio said it had filed its tariff plans with the Telecom Regulatory Authority of India (Trai).

SIX YEARS IN THE MAKING

Jio's launch has been six years in the making. Ambani re-entered the telecom sector by acquiring a company that had bought pan-India 4G spectrum in the 2300 MHz band in 2010. But technological challenges related to the frequency led to delays. It subsequently acquired airwaves in other frequencies and now has the highest quantum of 4G spectrum across the 800 MHz, 1,800 MHz and 2,300 MHz bands.

The oil-to-telecoms conglomerate had soft-launched its 4G services on December 27 last year, offering connections to nearly 1,20,000 employees, associates and their families. It offered 4G SIM cards and discounted Lyfbranded 4G-supporting handsets through its retail arm Reliance Retail. It has since gradually extended a free three-month voice and data trial offer to users of around 20 brands, besides Lyf, and says it has over 2 million users.

“Today, Jio's 4G network already covers 18,000 cities and towns and over 2 lakh villages. By March 2017, we will cover 90% of India's population,“ Ambani said, adding that he had set Jio's top management a target of reaching a 100 million subscriber base in the shortest time possible.

Jio has already invested over Rs 1.34 lakh crore of the Rs 1.5 lakh crore targeted for setting up its 4G network, on spectrum and other expenses. It has said Jio will spend the rest to expand coverage to 90% of the population.

The outlook for the sector isn't upbeat given that tariffs have already been cut in anticipation of the Jio launch.

“Jio's launch has been one of our key worries we have had for the last couple of years, and this is turning out to be quite negative. We continue to stay cautious (on the sector),“ brokerage Credit Suisse said in a note.

Bank of America Merrill Lynch said the top companies would see some adverse impact in the lower tiers, as the cheapest Rs 149 offer from Jio will appeal to voice-only consumers who will be able to make free voice calls on Jio's network. “This is a surprise as the market was not expecting Jio to aggressively target the low end,“ it said.

MORE CUTS LIKELY

Telcos had slashed effective data prices by almost 70% recently with Airtel offering voice free for higher-paying users. They will now have to make more cuts, which could hurt their financials in the lead up to spectrum auctions scheduled to start a month from now, analysts said.

Ambani also announced 25% additional data for students and 1 million WiFi hotspots across the country, “best-ever international calling rates,“ subscriptions to Jio apps and special solutions for enterprises.

“Jio's data, voice, video and full bouquet of Jio applications and content will be available for everyone, absolutely free, till December 31, 2016,“ he said promising to offer data speeds of up to 1gigabyte per second.

The Jio apps bouquet, which is pegged at Rs 15,000 for an annual subscription, will be free for active Jio customers until the end of next year. JioTV features 300 TV channels while JioCinema has a library of 6,000 movies, more than 60,000 music videos and 1 lakh episodes of TV shows in 10 languages, Ambani said. JioMusic has a library of 10 million songs in over 10 languages, while JioMagazine and JioNews offer access to thousands of magazines and newspapers. JioMoney is a wallet.

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BSNL is yet to get the department of telecom (DoT) nod for commercially rolling out 4G services while the Narendra Modi-led government is eyeing to launch fifth-generation or 5G technology together with matured markets worldwide in 2020.